Government spending on research and development and industrial production in Singapore

Abstract

The role of government policies in the economic growth of Singapore has been well documented. The government’s actions, such as the provision of appropriate infrastructure, have resulted in massive inflow of foreign capital to Singapore. Government sponsorship of selected industries and foreign investment helped domestic firms to gain access to advanced technologies. During the 1990s there was a significant increase in government spending on research and development (R&D) that can be attributed to the development of advanced technologies by Singaporean firms. This paper examines the impact of government-funded R&D in fostering the development of Singapore’s industrial production in the 1990s. The study explicitly considers the performance of three industries within the manufacturing sector: the machinery and equipment industry, the electrical machinery industry, and the transport equipment industry. It is shown that the fluctuations in real government spending on R&D had a significant positive impact on the performance of the selected manufacturing industries.